Tasty Bites: A proxy play to India’s QSR industry

(Aveek Mitra) #21


The Kagome document about the purchase, purchase price and structure


From the above it seems, as pointed out by Hrishikesh… Kagome paid US$ 80 million to PBI to own 50% of India subsidiary and to own the access to Tasty Bite brand name and marketing channels from PBI. How much is paid for what is a key question for me … Can we make some intelligent guesstimate? Possibly they have a plan of mining the brand much deeply and differently than what is being done till date by PBI through TBEL’s manufacturing.

Key question for TBEL would be, how much this manufacturing unit in India (they project in US website that TBEL is a manufacturing unit) and Indian operation is valued in the entire deal ? …Is the Rs. 2000/- figure can be taken as a valid assumption? I think now Kagome is free to bring in / manufacture anything they like under Tasty Bite brand making it anywhere in the world … Like say, Japanese / Korean ethnic foods in Vietnam or in another unlisted company in India or hypothetically in their other JV in India, Kagome Ruchi. Am I missing something here?

At present two scenarios are possible… 1) TBEL continue to grow as usual but Tasty Bite brand grows much faster in US (which may have some rub off positive effect on TBEL); 2) Kagome ramps up many other lines of manufacturing in India (seems unlikely knowing conservative Japanese approach as they own only 50% in TBEL, but I can be wrong).

What else may be possible in this scenario and based on that actual valuation of TBEL may be possible. In my subjective opinion Mr. Market presently thinking Kagome acquisition is greatly value accretive for TBEL but it may or may not be depending on the strategies Kagome would adopt.

End of the day, we are interested in TBEL and not really in PBI.

(Kiran) #22


Good to see interest in this story. Just a few more pointers -

a) I think it would be better if one reads up on the history of Kagome in the US and why they exited it (it’s not a new market for them, contrary to what appears due to open offer). And what would be the possible reasons for re-entry by buying out PBI?

b) Look up USFDA site. Search for this company. Then think Nestle. and then think entry barriers.

c) Let’s not try to value based on what Kagome thinks the value should be. Japanese are notorious for having 15-20-25 year plans (Softbank Chairman has a 100 year plan :slight_smile: ). I think the investment horizons are vastly different for a promoter and an investor. Think about rolling 3 year returns and see whether it’s a good buy or not.

d) Look up Kagome’s financials. And how they run the company and its margins etc. What’s the advantage that a Japanese company has today even though it’s poorly run?

e) Can they really scale up manufacturing like is projected? What is the current available land? What are the major veggies going into various dishes? What’s the advantage that the company is based out of Pune and not say Chennai/Bangalore?

f) Would Kagome be interested in the QSR business? Or not really? Why or why not?

g) The company had announced de-listing in the past (2009-10), but scrapped it. What do you think might be the possible reasons? (think large shareholders)

Simple story. Yet very many nuances. Lot of interesting angles :slight_smile:

Folks based out of Pune - Please do attend AGM and post notes.

(Aveek Mitra) #23


I find Kagome USA is very much there selling their Tomto based products for a long time. Here is the link


Kagome’s main business lines don’t overlap with PBI and there is only one area “Institutional & Industrial Product Business” which have commonality. Here is the profile of Kagome in detail (and luckily in English :smile:


Regarding production, each and every plant of Kagome is in Japan only and 100% owned by them. I am skeptical, if a Japanese company would start manufacture in India for Food Grade item at least in 2 - 3 year time frame of a purchase where they don’t have full ownership control. It is my subjective view and can be totally wrong.

If the Institutional Business they like to grow in India in the longer term, I do think TBEL would be benefitted. On Tomato based product line of Kagome, I guess Pune / TBEL has no edge as biggest Tomato growing areas in India are AP, Karnatkaka and MP (40% of total) and then West Bengal and Maharashtra (14% of total).

You can throw more light on the TBEL story…

(Rupesh Tatiya) #25

June’15 quarterly results out:
YoY (June 15 Vs. June 14):
Topline degrowth of 10% (36.76 Cr Vs. 40.63 Cr)
Other operating income went down to 20.7 Cr (Vs. 27 Cr.)
EBITDA degrowth of 19% (34.67 Cr. Vs. 42.4 Cr.)
NP degrowth of 15% (21.88 Cr. Vs. 25.66 Cr.)

Results Link: http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/42480068_5497_4DC4_B06A_A27EC017617F_143144.pdf

Disc: Invested, tempted to sell now and reenter at lower price

(Bhaumik) #26

I am a little confused with regards to the structure of Kagome deal. The deal in a way technically allows Kagome to leverage TB’s US distribution network and sell its products without involving TBEL.

Also, does someone have any idea on what was the shareholding structure before Kagome deal? I believe it was held by PE players and Ashok Vasudevan/Meera Vasudevan and others – pg 3 of http://www.kagome.co.jp/company/news/n_pdf/140415002.pdf.
I understand that this structure would be to give exit to PE players. But in the process, have AV/MV also partially exited? Currently they own 30% - what was their holding pre Kagome deal? And why did they exit partially, if at all – cashing out for years of efforts, especially at a time when they are talking of start of the third innings??

I am not able to clearly understand what good this deal does for TBEL and how different it would have been for TBEL, even if this deal hadn’t happened.

Also, why still continue with this manufacturing (TBEL) and marketing structure (PBI) – why not merge the two? Wouldn’t that simplify a lot of issues. What am I missing here?

(JatinK) #28

Any updates from the AGM?


a) 5 years of 25% CAGR.
b) Last year US (RTE) Business grew by +25%, domestic business grew by only 8% (FSSAI issue).
c) Aggressive growth in both segments this year. Do not give explicit growth targets,
d) Market reach in US doubled from 8000 to 16000 (out of 36000) outlets in one year.
e) FSSAI issues impacted India launches (Rockr was rejected). New launches this year Rockr Burger (KFC), Chilli Paneer Pockets (McDonalds). FSSAI no longer required to approve products as per supreme court order.
f) Started operation in UK this year. UK RTE market largest in world for Indian foods.
g) RTE market share for Indian food bigger than all other players (Haldiram, MTR, ITC etc.) combined.
h) Limited impact of food price fluctuation.
i) Working with local chains like FAASO’s.
j) Working on complete organic foods and will launch them in two years. Sourcing everything organic is very difficult. Working with farmers to grow organic rice etc.
k) Entered into a tie-up with Wendy’s UAE (15 stores) for QSR supplies.
l) Capacity utilization of various divisions: RTE (80%), Patties (60%), Sauces (50%).
m) New capacity to be added this year in RTE business. Capex plan 5.5 cr for one additional line (existing two lines).

Kagome Impact:
a) Largest manufacturer of Tomato Ketchup worldwide with far superior quality.Looking to develop tomatoes with Kagome help.
b) Will be using Kagome’s research in agricultural technologies.
c) Use each other’s distribution network.
d) Kagome’s name gives an easy entry in quality QSR, example cited was Wendy’s UAE.

Conclusion: Came out highly impressed with management.Entry into UK market +ve for RTE. Newer products with McDonalds, KFC, FAASOS shows traction in QSR. I liked their response on dividends where they said as long as we are able to deploy capital generating significantly higher returns than cost of capital the dividend payouts will be limited. Post that period they will increase significantly.

Discl: Holding from lower levels.

(Bhaumik) #30

Anyone has any idea on how one can get PBI Inc. financials. Is there a place where private companies in the US are required to file their financials and these are available at a price?

(Kiran) #31

Hi Bhaumik - Please write to Kagome Japan and try your luck. Being a publicly listed company, they might be obligated to send if enough of us write in.

Anyway, stellar results from Tasty Bites - http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/E50EA6CF_42E2_40C1_BE43_86E6D535822D_152901.pdf

16% sales growth, 67% profit growth. On track to cross 50 rupees EPS for FY16.

Disc: Invested. No transactions for last 30 days.

(Bhaumik) #32

Thanks Kiran…Have tried all that, but in vain. Anyway, need to make the best assessment out of whatever info is available!


This is as per Kagome’s Q2 presentation (Apr to June):
Kagome started consolidating PBI into their accounts from end of May this year. Their estimate of sales for the last two quarters (July-December) for PBI is 3.4 billion Yen (185 crores) . This is derived from Kagome presentation that says:

“Net Sales Plan by Segment FY2015 2nd Half: Net increase in sales by PBI (U.S.) (+¥3.4 billion). A weak yen will also have favorable impact.”

This is from Kagome’s 9 months (Jan to Sept) consolidated results:
The performance for PBI is from May end to September end (4 months) is sales of 5.18 billion Yen ( 282 crores). This is derived from Kagome’s statement that says:

“Sales to major food services customers were strong at Kagome Inc. Net sales at United Genetics Holdings LLC were at roughly the same level as the same period of the previous year, but there was net increase of sales at Preferred Brands International (“PBI”), which was made a consolidated subsidiary at the end of May 2015. As a result, net sales in the U.S. were up 37.4% from the same period of the previous year at ¥19.035 billion.”

Comparing this to last year (PBI) again from the presentation: In the period ended March 31, 2015, net sales reached ¥5.0 billion (272 crores), and operating income was ¥500 million (27.2 crores). - Revenue has increased over each of the past 7 periods, with an average growth rate of 17%/year.

Either I am interpreting something incorrect or it looks like PBI is having a dream run with May to September sales being greater than last year sales. For all the data and presentations you can look here:

Disclosure: Invested at an average price of 600 it forms more than 10% of my portfolio allocation. No transactions in last 6 months.



It is not listed in NSE.Further, what is the exit plan given the highly non-liquid status.( 2 week avg qty is only 580 shares). Though everything is excellent, how to we address these 2 factors. Nobody can predict what will happen in future.

I am generally biased against shares not listed in NSE. I did not invest in CUPID as I still view that counter with circumspection ( UC now and LC may be later, where one will not be able to get out). Though that scenario is ruled out here but still that worry is there. How do we address this?



I agree liquidity is less and a quick exit is difficult but that is not what I am looking for. Personally for me both of the above factors do not concern with BQ or MQ and are ignorables. Having said that I do look for liquidity at a portfolio level mainly to take advantage of opportunities that Mr. Market provides. Most of this liquidity come from cash or opportunistic bets (a small part of my portfolio) that I carry. For long term bets with high conviction and a long runway I do not worry about liquidity. Good mgmts. sort liquidity out in due course of time. I hope more people have NSE listing as a criteria for investment, I will gladly accept my improved chances on BSE :slight_smile: .

Disclosure: Invested at an average price of 600 it forms more than 10% of my portfolio allocation. No transactions in last 6 months

(Vivek Mashrani, CFA) #36

Today there is volume spurt of 24x coupled with breaching of upper circuit…any news on this stock which led to this??

Last time before open offer announcement there were similar high volume spurts and then finally the news came out.

Disclosure: Tracking but not invested

(iamket) #37

I am surprised no one has noticed or mentioned that Kagome already has a 50:50 JV in India with Ruchi Soya which is engaged in manufacturing of tomato paste & sauce. This would mean that TBE may have very little chance of entering this business.

Excerpt from Kagome profile:
“Ruchi Kagome Foods India Pvt. Ltd. (India)
Established in 2013, Ruchi Kagome Foods India manufactures and sells industrial-use tomato products. because most tomatoes in India are consumed fresh, the consumption of and market for processed tomato products is expected to expand in the near future and Ruchi Kagome Foods India is set to lead the way.”

Discl: looking at it actively but not invested.

(Sandeep Patel) #38

Tasty Bite Q3 FY16 results. Good show.

Financial Highlights -

  • Revenue up by 28% YoY from 40.44 cr to 51.84 cr
  • EBITA up by 58% YoY from 3.34 cr to 5.30 cr
  • Net Profit up 50% YoY from 2.28 cr to 3.42 cr

Source: https://www.tastybite.co.in/pdf/Financial-Results-for-Dec-31-2015.pdf


This is well known and was raised at AGM too where Kigome folks were present too. They did not take up the question and said this is not the right forum. To me Kagome’s tomatoes and Ketchups are small optionalities that do not matter much. Although the management did say that they will be using Kagome’s agri technologies for tomatoes.

(Sandeep Patel) #40

The presentation proposed to be made by Tasty Bite in the Antique’s “Build India, New India” investors’ conference (15th and 16th Feb 2016).

Source: http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/D39DD0D9_D631_4BC0_B2A7_90FDC3E1A90B_114311.pdf

(Sandeep Patel) #41

Chef’s Basket has launched Oriental Kit Series. Four flavours - i) Kung Pao, ii) Tsing Hoi, iii) Tangy Sichuan and iv) Khow Suey.

Any guess, who has been manufacturing sauces for Oriental kits? Yup, Tasty Bite.

CB offers Italian kit too; three pasta flavours. They made it to our kitchen sometime back. Have bad habit of reading details on package. Don’t remember seeing Tasty Bite name in Italian series.

Sorry, no comment on taste. Love to eat fresh food (old school). :slight_smile:


Looks interesting. Never saw that.